Pitney Bowes sells management services unit for $400 million

Updated 9:36 pm, Tuesday, July 30, 2013

An electrical engineer at Pitney Bowes works on one of the company's products in the Global Technology Center. Pitney Bowes is selling its management services unit to Apollo Global Management for $400 million as the Stamford-based firm focuses on core operations. less

An electrical engineer at Pitney Bowes works on one of the company's products in the Global Technology Center. Pitney Bowes is selling its management services unit to Apollo Global Management for $400 million ... more

Pitney Bowes is stepping away from one of its long-established businesses with an eye toward focusing its resources on high-tech development of mail technology and software and digital commerce.

The Stamford-based company, during a discussion with analysts about its second quarter results on Tuesday, said it is selling its management services unit to funds affiliated with Apollo Global Management for $400 million.

The international mail technology and communications business incurred a net loss of $9.23 million, or 5 cents per diluted share, in the quarter compared with net income of $99.62 million, or 50 cents a share, in the same quarter in 2012. Revenue slipped less than 1 percent to $1.2 billion.

The deal is expected to close in the fourth quarter.

Investors reacted to the news with enthusiasm, as the shares, traded on the New York Stock Exchange under the ticker symbol "PBI," surged 13 percent to $16.60 on Tuesday.

"This transaction represents a tremendous opportunity for both Pitney Bowes and PBMS (Pitney Bowes Management Services)," Marc Lautenbach, president and CEO, said in a statement. "It is part of our continued evolution into a company better aligned to address the needs of clients while focusing on the areas where we can create the greatest value for our clients and our shareholders."

PBMS, which represents 15 percent of the company's revenue, is a strong business with an impressive client list, Lautenbach said, commenting that it will benefit from operating as a more focused, stand-alone company in partnership with Apollo."

The unit, which has 15 employees at its Stamford headquarters, specializes in operating mail rooms for corporate clients, many of which are Fortune 500 companies, said Pitney Bowes spokeswoman Carol Wallace.

"All of the employees are moving with the company to serve the clients they are serving today," she said, adding that the unit has 9,000 employees, most of whom are deployed to its corporate clients.

In his report to analysts Tuesday, Lautenbach said the company is investing in growth areas while becoming more efficient and flexible.

"We have strengthened our balance sheet by further reducing our debt," he said.

Under Lautenbach, who arrived at Pitney Bowes from IBM in December, the company has been in transition, seeking other growth opportunities as it works to build off its mail technology, according to Shannon Cross, an analyst with Cross Research who compared the strategy to that embraced by Norwalk-based Xerox.

`A Distraction'

"Financially, Pitney's business management services is not a burden on Pitney, but it's a distraction from where it wants to go," she said, adding that the company wants to develop its e-commerce and software operations.

This is Apollo's second venture into Connecticut this year. Apollo in January joined Greenwich-based Metropoulos & Co. in acquiring the assets of Hostess Brands, the maker of the Twinkies snack cakes, which returned to grocery store shelves this month.

As of March 31, Apollo, traded on the New York Stock Exchange under the ticker symbol "APO," had $114 billion of assets under management.

Management of the Pitney Bowes unit impressed Apollo's leadership.

"Pitney Bowes Management Services offers an innovative business model supported by a highly talented team of individuals," Matthew Nord, partner at Apollo, said in the statement. "Their knowledge combined with cost-effective solutions drive business outcomes that help clients achieve their objectives."